Local Transport Act 2008 Brief Guide

LOCAL TRANSPORT ACT 2008 – BRIEF GUIDE DECEMBER 2008

SECTION 1

TRANSPORT POLICIES

1. Part 2 of the 2008 Act significantly amends sections 108 to 113 of the Transport Act 2000. The main points to note are:-

1.1 In developing transport policies the LTA must take account of any policies announced by the government with respect to the protection or improvement of the environment and have regard to any guidance issued with respect to the protection or improvement of the environment.

1.2 A requirement to prepare a document (or two or more documents) known as the Local Transport Plan (“LTP”) that contains the ITA’s policies for the promotion and encouragement of safe, integrated, efficient and economic transport to from and within their area.

The duty to prepare this document lies with the ITA. The provisions requiring the LTP to be a joint document with the Districts have been removed.

1.3 The duty in s109 of the 2000 Act to replace the LTP at least every 5 years is removed and replaced with a duty to replace “their plan as they think fit”. The duty is also to keep the LTP under review and alter it as they consider appropriate to do so. Aligned to this duty is a duty to consult each local traffic authority (4 districts) and the Secretary of State and such other persons as the ITA deem appropriate.

1.4 The need to prepare a separate Bus Strategy has been removed. 1.5 There is a new duty to have regard, when drawing up the policies and plans, to disabled persons.

1.6 The way that the draft commencement order is drafted means that an existing Local Transport Plan must be replaced no later than 5 years after the present one was made. Additionally, policies already in place do not have to be revisited having regard to environmental matters or the needs of the disabled until 1st April 2011 unless the ITA alters its policy before that date. Additionally, if a Bus Strategy is in place it shall continue to be relevant for the purpose of s124 of the Transport Act 2000 (Quality Contract Test).

2. The commencement order also clarifies that the LTP, (which are currently in PTA areas, a joint document of the PTA and districts), becomes, for the purpose of the 2008 Act, the transport policies and plans of the ITA alone, as required by s108 (1) (a) of the 2000 Act (as amended).

SECTION 2

WELLBEING POWERS

1. The 2008 Act introduces a new power, the power to promote well-being. This is stated as:- “An ITA has power to take any action if the ITA determines that doing so is likely to achieve any one or more of the following objects:- (a) the promote or improvement of the economic well-being of its area; (b) the promotion or improvement of the social well-being of its area; (c) the promotion or improvement of the environmental well-being of its area”

2. The power includes power to provide financial assistance to any person, incur expenditure, provide goods and services to any person, enter into arrangements with any person. The well-being power is limited to the extent that the doing of something is specifically prohibited, restricted or limited by any other enactment. Case law on equivalent powers for local authorities suggest that this restriction will be narrowly construed. A DCLG guide to well- being powers can be downloaded here

3. Importantly an ITA may delegate to the PTE its function of taking action under the well-being power (but not the decision to use the power). This means that the ITA would need to determine to use the power but that the PTE could implement it.

4. The well-being power will be of use to ITAs as it will extend the activities it and its executive body can undertake, for example, it will widen the existing grant making powers and allow it to extend travel concessions to groups of people who presently cannot be given concessionary travel.

SECTION 3

GOVERNANCE

1. The Local Transport Act 2008 introduces radical enabling provisions allowing for major governance reform and the introduction of Integrated Transport Authorities. Rosie Winterton the then Transport Minister said during the second reading of the debate on 26th March 2008:-

“Instead of taking a prescriptive approach to local transport governance, Part 5 of the Bill lays the foundations for local areas themselves to examine the strengths and weaknesses of their existing arrangements. They will be able to develop their own proposals for reforms to suit their local needs, which could then be implemented in secondary legislation tailored to the needs of the individual area. That process could lead to a stronger role for integrated transport authorities, perhaps with stronger powers on important matters such as bus lanes, leading to a more coherent and consistent approach”.

1.1 The first significant part of the Act in respect of governance is the change in the name of passenger transport areas to “integrated transport areas” and the change of name of PTAs to Integrated Transport Authorities.

1.2 The Act allows one or more authorities (being in relation to South Yorkshire the ITA itself or one of the four districts) to undertake a review of the ITA. If that review concludes that the exercise by the Secretary of State of any of the powers to make an order (see below) would improve:-

(i) the exercise of statutory functions relating to transport in the area, or (ii) the effectiveness or efficiency of transport in that area

then that authority must prepare and publish a scheme detailing how the ITA should be reformed and submit it to the Secretary of State.

In addition to an authority’s power to carry out a review, the Secretary of State could require one or more authorities to carry out a review. Any review could lead to the Secretary of State making an Order, which could relate to:-

(i) the constitutional arrangements of an ITA (membership of ITA, voting rights, executive arrangements, and functions of the ITA); (ii) delegation to the ITA of functions of the Secretary of State; (iii) delegation of Local Authority functions to the ITA; (iv) the conferring upon an ITA of the power to direct a local council in respect of the exercise of certain eligible powers relating to highways and road traffic; (v) changing the ITA’s boundary; and (vi) dissolving the ITA.

To implement an order the 2008 Act lays down a procedure that the Secretary of State has to follow that includes significant consultation requirements and procedures relating to the passing of the Order in Parliament. 2. Despite the provisions of the 2008 Act, local authorities and ITAs are still free to work up local arrangements that may not require an order, such arrangements being based on existing structures and the respective powers of the organisations involved.

SECTION 4

BUS ISSUES

1. VOLUNTARY AGREEMENTS

1. The Act has introduced helpful amendments to enable non-statutory agreements between either an operator(s) and the Local Transport Authority(ies) (“LTAs”) or between bus operators themselves. The amendments effectively allow certain agreements that would previously have been the subject of competition law in the guise of the Competition Act 1998 to be the subject of a bespoke bus based competition test contained in the Act. Voluntary Agreements are seen as a way of operators and LTAs making progress in delivering better quality and more stable services without necessarily invoking the Statutory Quality Partnership (“SQP”) or Statutory Quality Contract (“SQC”) process. Additionally, voluntary agreements may be used to supplement/support an SQP with the parties agreeing to matters/commitments outside the scope of an SQP but using the SQP to provide protection from low quality competition.

2. The Act simplifies the competition rules and makes them bus specific and importantly, provided any agreement does not relate to price fixing between operators, the Act removes some of the more draconian powers of the OfT. In particular, if the LTA(s) and operator(s) have entered into agreements that they believe pass the competition test but upon investigation by OfT are found to be in breach of the competition rules, the OfT’s power to levy fines is disapplied. These changes should give both LTAs and more importantly operators, the comfort to negotiate agreements. Such agreements can cover many aspects including the network to be provided, levels of fare increases, frequency of fare increases, frequency of services, vehicle standards, investment in infrastructure by the LTA, procedures governing de-registrations etc.

3. The key aspects of any agreement ‘passing’ the competition test are:-

 Does the agreement have as its object or effect an appreciable effect on competition by preventing, restricting or distorting competition? If yes, then the test must be applied as set out below.  If the agreement has an appreciable effect on competition it must pass the 3 stages of the test as follows:- (i) Does the agreement contribute to the attainment of the bus improvement objectives? (secure better vehicles or facilities or secure other improvements in local services or reduce congestion or air/noise pollution); (ii) Are the restrictions imposed on the bus operator indispensable in order to achieve (i) above. If not, the test has failed; (iii) Does the agreement allow the operator that is party to the agreement the possibility of eliminating competition? If yes, then the test has failed.

4. Whilst the competition test is complicated (as it still has to be based on the EU law governing competition) it is at least helpful in giving some comfort. The legislative provisions will be supported by guidance which the OfT have consulted upon. PTEG has made representations to OfT on the guidance suggesting improvements. A number of PTEs are now working with operators looking at the opportunities for voluntary partnerships to investigate how far they can go towards delivering bus service improvements. Such voluntary Agreements could be entered into bilaterally with one operator or multilaterally (with two or more operators). 2. STATUTORY QUALITY PARTNERSHIP SCHEMES

1. The Act makes many changes to the existing Statutory Quality Partnership Scheme (“SQP”) legislation. SQPs were a creation of the Transport Act 2000.

2. To date only one SQP has been introduced in the UK, in North Sheffield. In essence, an SQP is a scheme that is introduced by the LTA for the area allowing bus operators to use facilities provided by the LTA on the routes covered by the SQP only if the vehicles used meet standards that are defined in the scheme. It is important to note that there is no “agreement” between the LTA and Operators about the use of the facilities or the vehicle standards. The existence of a scheme means that the operators’ vehicles must meet the vehicle standards required if it wants to use the facilities. There is no compulsion to operate and no penalty if the operator de-registers and does not operate. Enforcement of the SQP against operators who use the facilities but fail to meet the standards is by the Traffic Commissioner.

3. Take up of SQPs since 2000 has been poor, and it is perceived that there are a number of reasons for this. These include:- (i) the voluntary nature of an SQP in that once made an operator is not forced to use the facilities and thus may not meet the standards; (ii) an LTA could invest in new facilities only to see deregistrations; (iii) The need to pass the competition test; (iv) The difficult process of negotiating standards for a scheme that are acceptable to operators (there is no point making a scheme that contains standards that operators refuse to meet and leads to withdrawal of services); (v) The fact that timings and frequencies could not be regulated; (vi) that there was no control of on road competition which, if it occurs, could undermine any investment in higher quality vehicles made by an operator.

4. The 2008 Act amends the 2000 Act in respect of SQPs in a number of areas and these may to an extent address some of the issues raised above. The main changes are as follows:- 4.1 Registration Restrictions - The introduction of the concept of “Registration Criteria”. These provisions in effect allow an LTA, in the QPS, to set down restrictions and criteria that the Traffic Commissioner would have to take into account when considering whether to allow an application to register a service, vary a service or de-register a service where the LTA consider such a registration, de-registration or variation would be detrimental to the provision of services under the QPS. The use of registration restrictions could be to prevent lower standard operations on parallel routes giving such operations a price advantage as they are not subject to the same standards. The draft guidance on QPSs issued by DfT makes it clear that the sole reason for including provisions for registration restrictions is to prevent destabilising competition. If an LTA includes registration restrictions and these have an adverse effect on competition they may make the passing of the competition test more difficult. Draft Regulations have been prepared which set out the process that will be followed where an application relating to a registration restriction is received by a Traffic Commissioner. In brief the Traffic Commissioner will consult both the LTA and operator and then may hold an inquiry and then make a determination having taken into account all the facts.

4.2. Standards relating to frequencies timings and fares - The legislation previously only allowed standards to be specified in a scheme if they related to vehicle standards. Under the new legislation in addition to vehicle standards, standards relating to the frequency or timing of services may be included as well as standards relating to maximum fares that may be charged for particular journeys.

However, standards relating to frequencies, timings and fares may only be stipulated if there has not been an admissible objection from a relevant operator(s). The process for determining whether an objection is admissible or not is left to Regulations. Draft Regulations have been produced. In brief, the process allows an operator to object to the standards in a draft scheme relating to frequencies, timings or fares within 28 days of the publication of the proposed scheme. The LTA may request further information from the objector and then must make a decision as to whether the objection is an admissible objection. Where the decision is that the objection is not admissible or that the operator is not a relevant operator, that operator may refer the matter to the Traffic Commissioner for a final determination.

Once made, if the scheme includes standards relating to fares, frequencies or timings, the Regulations will allow for reviews of those standards to be triggered by operators. The Regulations are not settled on this point yet. The Regulations also govern what the terms “admissible objection” and “relevant operator” mean, and both terms are defined fairly narrowly. However, the whole admissible objection and review system puts uncertainty into the process and will be a disincentive to LTAs to use SQPs which specify fares, frequencies and timings as it will potentially add time and cost into the process.

The standards that may be specified in respect of fares relate to “maximum fares”. Fares control is difficult and in practice will probably be standards specifying minimum periods between fare increases and fare increases being limited to increases in line with a specified index. This is also likely to be the route used in voluntary agreements.

4.3. Phasing - One useful amendment to the legislation is the explicit ability to phase in both standards and the availability of new facilities. This means that a scheme can allow different standards to be delivered on different dates, and the delivery of standards can be linked to the delivery of facilities, which again can be on different dates.

5. Where it is not possible to reach agreement with all operators in respect of standards there remains the possibility that voluntary agreements with operators may be used to supplement an SQP. 3. QUALITY CONTRACT SCHEMES

1. The Transport Act 2000 introduced the concept of quality contract schemes (“QCS”) being introduced where it was determined that they were the “only practicable way” of delivering the LTA’s bus strategy. To date no LTA has attempted to introduce a QCS. A QCS is a method of franchising the bus network or a part of it by the LTA awarding an exclusive contract to operate specified services on a route, corridor or in an area.

2. The legislation was thought to be both too onerous in terms of the legal tests to be satisfied and defective in certain areas such that it was unlikely that any LTA would use the legislative provisions and introduce a QCS. The Local Transport Act 2008 attempts to rectify those issues and make the use of the powers a realistic option. The main changes are as follows:-

2.1 Only Practicable Way Test/Section 124 Test – The statutory test in section 124 of the 2000 Act has been replaced with a test that removes the need for a QCS to be the only practicable way of implementing the bus strategy policies, with a test that requires the LTA to be satisfied that the QCS will (i) have a positive impact on the use of bus services (ii) will be of benefit to users of bus services by improving quality (iii) will contribute to the implementation of the local transport policies (iv) achieve all the above in an economic, efficient and effective manner, and; (v) that the adverse effects of a QCS on operators is proportionate to the improvement in wellbeing of persons living or working in the QCS area.

2.2 QCS Approval Process – Under the 2000 Act, a proposed QCS needed the approval of the Secretary of State before the LTA could make the QCS. Through the Local Transport Bill process the government proposed changing this to a QCS Approval Board, being the Traffic Commissioner and two lay persons, this body would then be the approving body. The final position in the Local Transport Act 2008 is that the 2000 Act is amended such that the LTA can make a QCS itself provided a “QCS Board” has been consulted and has given an opinion about whether the proposed QCS meets the section 124 test (see above). The LTA is free, once the QCS Board has given its opinion, to make the scheme. The QCS Board’s opinion matters in that if it states the QCS meets the s124 test then the rights of an aggrieved operator to appeal against the LTA’s decision to make the QCS are restricted to points of law only, otherwise they can appeal on fact and law. Any such appeals are to the Transport Tribunal.

2.3 Transitional Arrangements Period – One of the big risks an LTA faces when introducing a QCS is how to ensure a smooth transfer from the incumbent to the new contractor if the incumbent is not the QCS operator. There could be a period of time (possibly over 12 months) from award of QCS contract to commencement of services under the QCS (transitional arrangements period). At present, an operator can de-register services by giving 56 days notice. Government has indicated that this will be increased to 112 days where a QCS is being implemented. For larger schemes the availability of trained drivers was identified as an issue that could prevent successful implementation, it was also thought that the Transfer of Undertakings (Protection of Employees) Regulations (TUPE) would not apply in a QCS scenario. The new legislation therefore includes provisions that will make TUPE apply, including provisions to apply it to any workforce affected by the deregistration of services in the transitional arrangements period.

2.4 Phasing in of the QCS – the 2008 Act now allows for the provisions of a QCS to be phased in over a period of time, this may be particularly useful for a network type approach.

2.5 Continuation and Variations – the 2008 Act contains complicated and detailed provisions covering both the continuation of a scheme after its initial period (which may not be more than 10 years) ends, and variations the LTA wish to make during the operational period of a QCS.

3. The 2008 Act introduced many other consequential amendments and these together with the above highlighted areas, (particularly the amendments relating to the s124 test and the move to give LTA’s the power to make a QCS without 3rd party approval), make the introduction of a QCS a more realistic option.

4. MISCELLANEOUS BUS ISSUES

The 2008 Act makes a number of other amendments, of particular note are:-

1. The granting to PTEs of the power to let passenger vehicles on hire in connection with a service subsidy contract (s89 contract), to community transport operators (s19 permit holders) and as part of a QCS. This regularises the position for a number of PTEs who may own vehicles or have had to grant fund acquisition under s106 Transport Act 1985. In future, for s89 contracts and community transport the PTE will be able to own and let vehicles and be able to make decisions whether this is a better option than funding the operator to purchase.

2. Amendments to section 9A of the Transport Act 1968 (general functions of PTAs) which in effect widens the scope of using s89 subsidised service contracts to allow subsidised service contracts to be awarded where services are not provided to standards that the PTA determine relating to frequency or timings of services, the days or times of day services are provided or the standard of vehicles used to provide services. At present the power to let subsidy contracts only applies where there is no commercial provision.

Additionally the contract period of any subsidised service contract has been extended from a maximum of 5 years to a maximum of 8 years.

3. Rail Passengers Council (“RPC”) – the 2008 Act puts in place the framework to allow the remit of the Rail Passengers Council to be extended to bus. The detail and scope of their remit is left to Regulation. PTEG has campaigned for the role to include an appeals role on passenger complaints, a requirement on the Traffic Commissioner to have regard to RPC recommendations, and powers to access performance data from operators.